In Preparing Its Adjusting Entries at the End of This

Multiple Choice

In preparing its adjusting entries at the end of this year, Johns Company neglected to adjust the Prepaid Insurance account for the amount of insurance expired during the year.
This error:

A) Understates this year's net income and overstates both retained earnings and assets at year-end
B) Overstates this year's net income and understates both retained earnings and assets at year-end
C) Understates this year's net income and understates both retained earnings and assets at year-end
D) Overstates this year's net income and overstates both retained earnings and assets at year-end
E) None of the above